Community Coup and Township Markets

Community Coup and Township Markets

FNB Home Loans recently reported that in the first quarter of 2015, residential price growth in townships outstripped many higher-priced suburban regions. The report by John Loos, household and property sector strategist for FNB, explains that prices in areas formerly labelled as black townships under apartheid era classification rose by 11,6% across the six major metro regions in the first quarter after a 9,3% rise in the last quarter of 2014. This figure is significantly higher than the overall Major Metro Regions House Price Index growth rate of 7,3% for the same period.

Loos explains that this inflation can be attributed to two main factors – a high percentage of first-time buyers entering the market, and demand (affordability being a key priority for these people).

The experience of agents on the ground reveal similar findings. “We can’t keep up,” says Paul Campbell of Pietermaritzburg-based Natal Property Consultants. “We took a decision eight or nine years ago to branch into this market and have never looked back.” Natal Property Consultants, which services suburban areas as well as former townships such as Edendale and Imbali, has six specialist agents in the township areas who are continually making sales and a number of other agents who regularly make sales in township areas.

Besides the normal exchange of homes in places such as Edendale and Imbali, markets are shifting. “A few years ago,” says Campbell, “agents working in the suburbs would refer these properties to our agents in the townships, but many of them now know their way around the townships and are taking a far more active role in the sales process. As a company, we have invested significantly in the township areas. Although the houses are priced at the lower end of the spectrum, from R250_000 for a four-bedroom house to a maximum of R800_000 for a very large home, the market is really active and we wouldn’t want to miss out.”

The situation is similar in Soweto. Says Private Property CEO Simon Bray, “Soweto is one of the most popular areas on Private Property and consistently features in the top 50 in terms of visits. It is a high-demand area with a large number of views for every listing; properties for sale in Soweto get 25% more views per listing than properties in the greater Johannesburg central and CBD areas. There is also a high demand for rental properties, with 34 people, on average, interested in each property for rent.”

“Affordability and value for money are major drawcards in areas such as Soweto,” says Dina Soukop, CEO of Soukop Property Group. “One can pay R900 000 for a four-bedroom, two-bathroom home on a 460m2 stand with outside cottage, or R799 000 for a two-bedroom, three-bathroom home in Meadowlands, complete with outdoor braai area and fireplace.”

Demand is outstripping supply, according to Khumbulani Mcanana, partner at KK Mavela Properties, which services areas such as Durban, Umlazi, Verulam, Newcastle, Vryheid and Ulundi. “If a property in a township area is priced correctly, there is no way it will stay even two months on the market,” he says. The increase in value, too, is “phenomenal”. Mcanana gives the example of a house (two bedrooms, one bathroom and kitchen and dining room) in Kwamashu that was bought for R15 000 in 2000: after some renovation it sold for R185 000 in 2004 and again in 2013 for R285 000.

“There are two main problems that we face in the townships, the first being crime,” adds Mcanana. “The crime itself appears to originate in the surrounding shack lands, where people are unemployed, and in the hostels. If the government was diligent about removing informal settlers, it would increase the values in township properties even further, and I hope to see that happening in the next 10 to 15 years.”

Mcanana and Campbell agree on the second problem: creditworthiness. Many clients buying at the lower end of the market are financially vulnerable and struggle to raise a bond. This often results in township properties being “sold” two, three or four times before a real deal goes through. “Yet, despite the fact that the agents work three times harder, they still continue to make sales,” adds Campbell.

In the Western Cape, Nazmie Anthony of Pam Golding Properties Mitchells Plain and Southeastern Suburbs has 12 agents in Mitchells Plain alone. “Regardless of creditworthiness, we are finding that the average age of first-time buyers is getting lower and lower, as this generation gets better jobs and earns more. We have a policy, though, of getting all our clients in these areas preapproved for credit before we show them any properties.”

Like former township areas in other parts of the country, the demand in the Western Cape is high. “Prices have risen too,” says Anthony. “A three-bedroom council house in Gugulethu would have fetched R110 000 to R180 000 five years ago but will now sell for R280 000 to R360 000. You’re looking at R850 000 for a four-bedroom bonded home in Ilitha Park in Khayelitsha. And prices for three-bedroom homes in suburbs such as Portlands, Rocklands and Westridge in Mitchells Plain have increased from R290 000 to R340 000 five years ago to R450 000 to R640 000.

“There is lots of movement. Homes in general are well maintained. Many people sell to upgrade and many sell to move to other areas that perhaps offer more prestige or better value for money,” Anthony adds. “Although we have 51 listings in Mitchells Plain, and even though our agents live in the area, have been to school there, belong to the local sports clubs and know their neighbours, we still need to do regular expos to get sufficient stock.”

 

Words: André Fiore

 

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